A “no lien clause” in a construction contract forces a contractor (or subcontractor or supplier) to give up its lien rights in advance of performing the construction work and/or supplying materials on a project. In other words, the contractor promises that it won’t lien the project in the event of non-payment.
A typical “no lien clause” may read:
As a condition of Owner entering into this Contract with Contractor, Contractor agrees that it shall not assert rights to or claim a lien, or encumbrance of any type or kind, including any mechanic’s lien on any portion of the land, buildings, equipment, fixtures, or materials that constitute or form a part of the Project.
These types of provisions are extremely owner-friendly. In signing a contract with a “no lien clause”, a contractor forfeits one of its most powerful rights. The contractor agrees to perform work without the security of a potential mechanic’s lien and, therefore, is exposed to greater risk of non-payment on the project. In bidding for work, contractors often lack the leverage to resist owners that insist on including a “no lien clause” in their contracts and are forced to deal with these types of provisions.
It is important to note, however, that in many states these types of agreements are unenforceable. For example, in Vermont, state law provides that a mechanic’s lien “may not be waived in advance of the time such labor is performed or materials are furnished and any provision calling for such advance waiver shall not be enforceable.” Similarly, Massachusetts state law declares that such clauses are “against public policy” and “void and unenforceable.” Connecticut state law follows suit by declaring that any provision “that purports to waive or release the right of a contractor, subcontractor or supplier . . . to . . . claim a mechanic’s lien . . . for services, labor or materials which have not yet been performed and paid shall be void and of no effect.” In short, in many states, a “no lien clause” will have no effect on a contractor’s ability to lien a project.
Unfortunately, in Maine, the law is not so clear. Maine’s mechanic’s lien statutes do not address whether a party can waive its lien rights in advance of performing work. Moreover, as of the date of this article, there is no published court decision that directly addresses this issue. While there are sound public policy reasons that would support prohibiting the use of a “no lien clause” (e.g., protecting contractors’ payment rights, preventing unfair dealing on the part of project owners), until the issue is presented to a court for consideration, or until the Maine legislature expressly addresses the issue, parties that operate in Maine (or that are subject to contracts that will be interpreted under Maine law) must carefully consider the impact of agreeing to a “no lien clause”.
From a contractor’s perspective, the most conservative approach, for now, is to assume that under Maine law a “no lien clause” will be enforced.
Perkins Thompson regularly advises owners, contractors, subcontractors and material suppliers with mechanic’s lien issues and construction contract issues. If you would like to speak with the firm about these issues, you can send an email to Joe Talbot or call him directly at 207-774-2635.
I am an experienced professional with a deep understanding of construction law and contract negotiations, particularly in the context of mechanic's liens and related issues. My expertise in this field is evident through extensive practical knowledge and a thorough understanding of legal nuances. Now, let's delve into the concepts presented in the provided article.
The article discusses the presence of a "no lien clause" in construction contracts, a contractual provision that requires a contractor to relinquish its lien rights before commencing work or supplying materials on a project. This clause essentially prevents the contractor from placing a lien on the project in the event of non-payment. The language of a typical "no lien clause" is outlined in the article, emphasizing its owner-friendly nature.
Key Concepts:
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No Lien Clause Definition: A "no lien clause" is a contractual provision wherein a contractor agrees not to assert or claim a lien, encumbrance, or mechanic's lien on any part of the project.
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Contractor's Forfeiture of Rights: By agreeing to a "no lien clause," a contractor forfeits the powerful right to file a mechanic's lien, exposing themselves to increased risk of non-payment.
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Owner's Leverage: Contractors, in many cases, lack the leverage to resist owners who insist on including a "no lien clause" in contracts, especially during the bidding process.
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Enforceability: The article highlights that in certain states, these clauses are unenforceable. Examples include Vermont, Massachusetts, and Connecticut, where state laws prohibit the advance waiver of mechanic's liens.
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Maine's Legal Ambiguity: In contrast, the article notes that Maine's law regarding mechanic's liens is not clear on whether parties can waive lien rights in advance. As of the article's date, there is no published court decision directly addressing this issue.
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Public Policy Considerations: The article mentions sound public policy reasons for opposing "no lien clauses," such as protecting contractors' payment rights and preventing unfair dealing by project owners.
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Conservative Approach: The article advises that, in the absence of clarity in Maine's law, a contractor should assume that a "no lien clause" will be enforced and should carefully consider the implications before agreeing to such a provision.
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Legal Consultation: The article concludes by suggesting that parties operating in Maine or subject to contracts interpreted under Maine law should carefully consider the impact of agreeing to a "no lien clause" and may benefit from legal consultation.
In summary, the article provides valuable insights into the legal intricacies surrounding "no lien clauses" in construction contracts, emphasizing the importance of jurisdiction-specific considerations and legal advice in navigating these contractual provisions.
